ESG Risk Assessment and Integration of ESG Factors into Supplier Selection

The sustainable assessment standard is integrated into EGCO Group’s supplier selection and screening process to ensure their capabilities to provide raw materials and services that meet the company’s expectations. Suppliers are required to complete the self-assessment questionnaire (SAQ) covering various topics. Purchasing practices towards suppliers are continuously reviewed to ensure alignment with the Supplier Code of Conduct and to avoid potential conflicts with ESG requirements. EGCO Group reserves the right to review suppliers’ operations regarding environment, social, and governance (ESG) as deemed appropriate. Suppliers are excluded from contracting if they cannot achieve minimum ESG requirements within a set timeframe. EGCO Group also reserves the right to exclude the supplier that fails to meet EGCO Group’s ESG requirements in the subsequent selection process

Quality of products and services, innovation management

Good corporate governance, data leakage prevention, law compliancy

Environmental management system, environmental projects, and the prevention of violation of environmental regulations

Social issues, include compliance with labor regulations and human rights, equal treatment, and human resources development

Occupational health and safety management system, accident prevention, and data reporting

Supplier Analysis

Significant suppliers are identified as critical and high-risk suppliers. Significant supplier analysis is carried out with the consideration of the following elements. Criteria to identify critical suppliers are as follows:

Active supplier during assessment.
Critical component/non-substitutable suppliers or similar and business relevant
High-volume suppliers (more than 80% of yearly total procurement)

Criteria to identify high-risk suppliers involve expenditure and the outcomes of ESG risk assessment across key issues including economic factors, environment, safety, and reputation of the organization.

Economic risks e.g. quality and pricing of products and services, monopoly, and sustainable procurement.
Environmental risks e.g. water consumption and wastewater management, greenhouse gas emissions, energy consumption, impact on biodiversity, and air pollution.
Safety risks e.g. production process safety, accident rate, and emergency preparedness and response.
Reputation risks e.g. corruption, tax evasion, human rights, and employee treatment.

The suppliers categorized as critical suppliers and high-risk suppliers, with transaction volumes exceeding 5 million baht and gaining more than 50% assessment score are eligible to register as EGCO Group’s ‘Approved Vendor List’. Suppliers with a below 50% assessment score are required to develop a corrective action plan before becoming suppliers of EGCO Group.

Standard Clauses in TOR for High-volume Contract

Example of Supplier Screening and Risk Assessment

Country	Business Sector	Commodity	Sustainability Issues
Thailand	Renewable Wind	Generate and supply electricity to its customer	Environment: Environment pollution:Thailand's environmental pollution results from rapid urbanization, industrial growth, and agricultural practices, impacting air, water, and noise quality. Biodiversity: Thailand’s biodiversity is threatened by various factors e.g., illegal hunting, deforestation, pollution, tourism, transportation, etc. These endanger its diverse ecosystems. Climate Change: Thailand faces significant risks from climate change including heavy rainfall, floods, droughts, and rising sea levels, which particularly impact the country's coastal areas. Social: Refugees, asylum seekers, and migrant workers: Thailand's failure to sign the UN refugee convention and its lack of differentiation between asylum seekers and illegal immigrants have left many in constant fear of arrest and deportation. Violation of Human Rights in southern border provinces: Human rights violations in Thailand's southern border are highly concerned. Human Rights Watch records cases of police and military torturing ethnic Malay Muslims in custody Governance/Economic:The demand for electricity and energy depends upon economic growth. Domestic and overseas investment decisions and development use economic data to calculate project feasibility to ensure that the EGCO Group invests in meaningful projects.	Environment: Climate Change:Extreme weather disrupts renewable energy materials, causing delays, shortages, and price fluctuations, impacting accessibility and affordability. Environmental Pollution: Renewable energy installations may alter land use patterns and disrupt wildlife habitats, while certain technologies require substantial amounts of water. Social: Occupational Health and Safety in the workplace: Working in confined spaces, in operation of industrial equipment and moving part of machinery are hazardous for workers that may resulting to injury in various forms. Communities:Renewable plants can be a source of potential environmental and health and safety nuisances to local communities. Workforce issues: The industry is encountering significant workforce challenges as the demand for green jobs is surpassing the availability of skilled workers throughout the supply chain. Human rights violation: Instances of low pay, long working hours, or poor health and safety standards, both in the final manufacturing process and throughout the entire supply chain. Cybersecurity risk: Renewable energy systems face cyber threats, risking operational disruption, equipment damage, data compromise, and grid instability. Governance/Economic: Economic risk: Escalating energy costs are significantly impacting suppliers and contractors, posing a potential threat to manufacturing capacity for vital renewable energy components. Technological and innovation risk: Rapid evolution of renewable technology may swiftly obsolete the existed, impacting project performance and profitability, posing reliability and longevity challenges. Political, policy and regulatory risk: Renewable energy projects navigate varied regulations across jurisdictions, prone to frequent changes, causing uncertainty for developers, investors, and insurers. Supply Chain: Construction delays due to cost or labor issues can spark disputes. In addition, some raw materials for renewable energy projects are limited Then, supply chain risks amidst regulatory shifts and political instability.	Environment: Wildlife and habitat: Wind turbines pose significant risks to wildlife, particularly birds and bats, due to collisions caused by air pressure changes and habitat disruption. Climate Change: Wind power generation can also be affected by changes in wind patterns due to the climate change impact. Copper production risk: Copper, a commonly used conductor in wind farms for energy generation, emits sulfur and nitrogen dioxide during its production process, contributing to the formation of acid rain. Waste: Wind turbines and construction materials may be disposed of through incineration or landfilling although some ae recyclable, contributing to environmental impact. Social: Occupational health and safety in the workplace: Work Environment: As wind farms are situated in the known for consistent wind patterns, which can heighten the risk of workers to fall during periods of strong winds. Wind turbines height may poses fall and struck-by risks for workers during construction and maintenance tasks, often requiring ladder ascents hundreds of feet high. Communities: Sound and vibration issues from the wind turbine may affect the community around the operation. Human rights violation: Instances of low pay, long working hours, or poor health and safety standards, both in the final manufacturing process and throughout the entire supply chain. Governance/Economic: Political, policy and regulatory risk: Wind energy projects face regulatory challenges across jurisdictions and various policies, with frequent and unpredictable changes causing uncertainty and complexity. Economic risk: Escalating energy costs are significantly impacting suppliers and contractors, posing a potential threat to manufacturing capacity for crucial components in wind farm sectors.	1. Right to life 17. Right to own property 21. Right to freedom of association 24. Right to work 27. Right to an adequate standard of living (housing, food, water, and sanitation) 28. Right to health 31. Right to self-determination and natural resources 35. Rights of minorities
Thailand	Power	Generate and supply electricity, steam, and processed water to its customers.	Political Landscape: EGCO has investments abroad, such a s in the United States, Taiwan, and nearby countries in Southeast Asia. EGCO Group recognizes the importance of conflicts that directly affect supply chain in these countries, including laws, and various restrictions. The conflict between China and Taiwan have escalated over military actions, such as deploying warships and planes to patrol Taiwan’s self-defense lines. Arbitrary and secret detention: Unlike in previous years, there were no reports that the government or its agents committed arbitrary or unlawful killings. There were reports of killings by both government and insurgent forces in connection with the conflict in the southernmost provinces. (https://www.state.gov/wp-content/uploads/2023/03/415610_THAILAND-2022-HUMAN-RIGHTS-REPORT.pdf) Violence and abuses in southern boarder provinces: Internal violence continued in the ethnic Malay-Muslim-majority southernmost provinces. Frequent attacks by suspected insurgents and government security operations stoked tension between the local ethnic Malay-Muslim and ethnic Thai Buddhist communities. Refugees, asylum seekers, and migrant workers: The government generally cooperated with UNHCR, the International Organization for Migration, and other humanitarian organizations in providing protection and assistance to refugees, asylum seekers, stateless persons, and other persons of concern, although with many restrictions.	Issues related to core operations Health and safety: Organizations should acknowledge the potential hazards to health and safety and implement necessary measures to prevent accidents and mitigate their impacts. Security of operations: This covers the activities undertaken by a company or their contractors to protect their assets and ensure the safety of their employees. Power stations can become a target of demonstrations organized by environmental and community organizations. Supply chain: Companies face human rights issues and risks in their supply chain, as purchasers of feedstock or workforce from other companies/sub-contractors which may be associated with poor practice or controversy. Fuel sourcing: Purchasing of coal, natural gas, and biomass all have risks associated with them. Other key products and services: As well as purchasing supplies, the power generation sector uses contractors and sub-contractors at various stages. Community-related Issues Community health and safety: Power stations, whether coal-fired, biomass, or renewable energy plants can be a source of potential environmental and health and safety risks which affect workers and local communities. Property rights and land acquisition: Communities may need to be relocated if their current location is to be re-developed for a power generation plant. In such cases, the community's requirements may encompass housing land, agricultural land, access to fisheries and traditional livelihoods, as well as land for community activities. Access to resources: Energy production accounts for 15% of the world's water usage. It also uses a lot of other resources.	Health and safety: Workplace conditions, particularly health and safety in the workplace. Communities: Power stations, whether coal-fired, nuclear, biomass, or renewable energy plants can be a source of potential environmental and health and safety risks which affect workers and local communities. Supply chain: Standards for contractors/sub-contractors and suppliers related to human rights requirements and health and safety (e.g. child labor, forced labor, etc.). Climate change: Climate change impacts can introduce uncertainties and volatility into commodity markets. Extreme weather events, such as hurricanes, droughts, or floods, can disrupt commodity supply chains, leading to price fluctuations and potential shortages. Changes in consumer preferences and regulations aimed at mitigating climate change can also influence demand for commodities, impacting their prices and market dynamics.	3. Right not to be subjected to slavery, servitude, or forced labor 8. Right to access to effective remedies 15. Right of protection for the child 21. Right to freedom of association 24. Right to work 25. Right to enjoy just and favorable conditions of work including rest and leisure 26. Right to form trade unions and join the trade unions, and the right to strike 27. Right to an adequate standard of living. 28. Right to health 35. Rights of minorities.

Country

Business Sector

Commodity

Sustainability Issues

Country Level

Sector Level

Commodity-Specific Level

Individual Human Rights Risk

Thailand

Renewable Wind

Generate and supply electricity to its customer

Environment:

Environment pollution:Thailand's environmental pollution results from rapid urbanization, industrial growth, and agricultural practices, impacting air, water, and noise quality.

Biodiversity: Thailand’s biodiversity is threatened by various factors e.g., illegal hunting, deforestation, pollution, tourism, transportation, etc. These endanger its diverse ecosystems.

Climate Change: Thailand faces significant risks from climate change including heavy rainfall, floods, droughts, and rising sea levels, which particularly impact the country's coastal areas.

Social:

Refugees, asylum seekers, and migrant workers: Thailand's failure to sign the UN refugee convention and its lack of differentiation between asylum seekers and illegal immigrants have left many in constant fear of arrest and deportation.

Violation of Human Rights in southern border provinces: Human rights violations in Thailand's southern border are highly concerned. Human Rights Watch records cases of police and military torturing ethnic Malay Muslims in custody

Governance/Economic:The demand for electricity and energy depends upon economic growth. Domestic and overseas investment decisions and development use economic data to calculate project feasibility to ensure that the EGCO Group invests in meaningful projects.

Environment:

Climate Change:Extreme weather disrupts renewable energy materials, causing delays, shortages, and price fluctuations, impacting accessibility and affordability.

Environmental Pollution: Renewable energy installations may alter land use patterns and disrupt wildlife habitats, while certain technologies require substantial amounts of water.

Social:

Occupational Health and Safety in the workplace: Working in confined spaces, in operation of industrial equipment and moving part of machinery are hazardous for workers that may resulting to injury in various forms.

Communities:Renewable plants can be a source of potential environmental and health and safety nuisances to local communities.

Workforce issues: The industry is encountering significant workforce challenges as the demand for green jobs is surpassing the availability of skilled workers throughout the supply chain.

Human rights violation: Instances of low pay, long working hours, or poor health and safety standards, both in the final manufacturing process and throughout the entire supply chain.

Cybersecurity risk: Renewable energy systems face cyber threats, risking operational disruption, equipment damage, data compromise, and grid instability.

Governance/Economic:

Economic risk: Escalating energy costs are significantly impacting suppliers and contractors, posing a potential threat to manufacturing capacity for vital renewable energy components.

Technological and innovation risk: Rapid evolution of renewable technology may swiftly obsolete the existed, impacting project performance and profitability, posing reliability and longevity challenges.

Political, policy and regulatory risk: Renewable energy projects navigate varied regulations across jurisdictions, prone to frequent changes, causing uncertainty for developers, investors, and insurers.

Supply Chain: Construction delays due to cost or labor issues can spark disputes. In addition, some raw materials for renewable energy projects are limited Then, supply chain risks amidst regulatory shifts and political instability.

Environment:

Wildlife and habitat: Wind turbines pose significant risks to wildlife, particularly birds and bats, due to collisions caused by air pressure changes and habitat disruption.

Climate Change: Wind power generation can also be affected by changes in wind patterns due to the climate change impact.

Copper production risk: Copper, a commonly used conductor in wind farms for energy generation, emits sulfur and nitrogen dioxide during its production process, contributing to the formation of acid rain.

Waste: Wind turbines and construction materials may be disposed of through incineration or landfilling although some ae recyclable, contributing to environmental impact.

Social:

Occupational health and safety in the workplace:

Work Environment: As wind farms are situated in the known for consistent wind patterns, which can heighten the risk of workers to fall during periods of strong winds.
Wind turbines height may poses fall and struck-by risks for workers during construction and maintenance tasks, often requiring ladder ascents hundreds of feet high.

Communities: Sound and vibration issues from the wind turbine may affect the community around the operation.

Human rights violation: Instances of low pay, long working hours, or poor health and safety standards, both in the final manufacturing process and throughout the entire supply chain.

Governance/Economic:

Political, policy and regulatory risk: Wind energy projects face regulatory challenges across jurisdictions and various policies, with frequent and unpredictable changes causing uncertainty and complexity.

Economic risk: Escalating energy costs are significantly impacting suppliers and contractors, posing a potential threat to manufacturing capacity for crucial components in wind farm sectors.

1. Right to life

17. Right to own property

21. Right to freedom of association

24. Right to work

27. Right to an adequate standard of living (housing, food, water, and sanitation)

28. Right to health

31. Right to self-determination and natural resources

35. Rights of minorities

Thailand

Power

Generate and supply electricity, steam, and processed water to its customers.

Political Landscape: EGCO has investments abroad, such a s in the United States, Taiwan, and nearby countries in Southeast Asia. EGCO Group recognizes the importance of conflicts that directly affect supply chain in these countries, including laws, and various restrictions. The conflict between China and Taiwan have escalated over military actions, such as deploying warships and planes to patrol Taiwan’s self-defense lines.

Arbitrary and secret detention: Unlike in previous years, there were no reports that the government or its agents committed arbitrary or unlawful killings. There were reports of killings by both government and insurgent forces in connection with the conflict in the southernmost provinces. (https://www.state.gov/wp-content/uploads/2023/03/415610_THAILAND-2022-HUMAN-RIGHTS-REPORT.pdf)

Violence and abuses in southern boarder provinces: Internal violence continued in the ethnic Malay-Muslim-majority southernmost provinces. Frequent attacks by suspected insurgents and government security operations stoked tension between the local ethnic Malay-Muslim and ethnic Thai Buddhist communities.

Refugees, asylum seekers, and migrant workers: The government generally cooperated with UNHCR, the International Organization for Migration, and other humanitarian organizations in providing protection and assistance to refugees, asylum seekers, stateless persons, and other persons of concern, although with many restrictions.

Issues related to core operations

Health and safety: Organizations should acknowledge the potential hazards to health and safety and implement necessary measures to prevent accidents and mitigate their impacts.

Security of operations: This covers the activities undertaken by a company or their contractors to protect their assets and ensure the safety of their employees. Power stations can become a target of demonstrations organized by environmental and community organizations.

Supply chain: Companies face human rights issues and risks in their supply chain, as purchasers of feedstock or workforce from other companies/sub-contractors which may be associated with poor practice or controversy.

Fuel sourcing: Purchasing of coal, natural gas, and biomass all have risks associated with them.

Other key products and services: As well as purchasing supplies, the power generation sector uses contractors and sub-contractors at various stages.

Community-related Issues

Community health and safety: Power stations, whether coal-fired, biomass, or renewable energy plants can be a source of potential environmental and health and safety risks which affect workers and local communities.

Property rights and land acquisition: Communities may need to be relocated if their current location is to be re-developed for a power generation plant. In such cases, the community's requirements may encompass housing land, agricultural land, access to fisheries and traditional livelihoods, as well as land for community activities.

Access to resources: Energy production accounts for 15% of the world's water usage. It also uses a lot of other resources.

Health and safety: Workplace conditions, particularly health and safety in the workplace.

Communities: Power stations, whether coal-fired, nuclear, biomass, or renewable energy plants can be a source of potential environmental and health and safety risks which affect workers and local communities.

Supply chain: Standards for contractors/sub-contractors and suppliers related to human rights requirements and health and safety (e.g. child labor, forced labor, etc.).

Climate change: Climate change impacts can introduce uncertainties and volatility into commodity markets. Extreme weather events, such as hurricanes, droughts, or floods, can disrupt commodity supply chains, leading to price fluctuations and potential shortages. Changes in consumer preferences and regulations aimed at mitigating climate change can also influence demand for commodities, impacting their prices and market dynamics.

3. Right not to be subjected to slavery, servitude, or forced labor

8. Right to access to effective remedies

15. Right of protection for the child

21. Right to freedom of association

24. Right to work

25. Right to enjoy just and favorable conditions of work including rest and leisure

26. Right to form trade unions and join the trade unions, and the right to strike

27. Right to an adequate standard of living.

28. Right to health

35. Rights of minorities.